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THE EFFECT OF BUDGET DEFICIT ON ECONOMIC GROWTH IN NIGERIA

ABSTRACT

The study examined budget deficit and economic growth in Nigeria. It specifically investigated the relationship between excess public expenditure, public revenue reduction, inflation rate, unemployment rate and real gross domestic product of Nigeria. This study adopted ex-post facto research design. Relevant data regarding the variables under-study were extracted from the Central Bank of Nigeria (CBN) statistical bulletin. The study period covered thirty-one (10) years spanning from 2009 to 2019, while error correction model was used to analyze the data. The findings revealed among other things that; there was presence of co-integration (long-run relationship) among the variables in the model, excess public expenditure and public revenue reduction has significant relationship with economic growth of Nigeria, while inflation rate and employment rate does not any positive relationship with economic growth of the country in the long run. The study therefore concluded that there is significant relationship between excess public expenditure and economic growth of Nigeria, depending on the variable of interest. Likewise, the study recommended among other things that government should ensure efficiency and effectiveness in the public financial management due to the insignificant influence of inflation rate on economic growth both in the long run and short run which is a pure indication of poor public financial management in the country. Also, the component governments in Nigeria should reduce it public borrowing as it has a significant inverse effect on the economic growth of the country in the long run.

Keywords: Budget deficit, Excess public expenditure, Public revenue reduction, Inflation rate

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